Business Plan

Preparation
Chapter 5
Business Plan
• Sources of ideas for Business
• Prefeasibility Study
• Criteria for Selection of Product
• Ownership
• Capital Budgeting
• Project Profile Preparation
• Matching Entrepreneur with the Project
• Feasibility Report Preparation and Evaluation Criteria
Business Idea
An entrepreneurial idea should be:
• Practically Possible
• Technically Feasible
• Economically Viable
• Financially Profitable
• Socially Acceptable and
• Environment Friendly
• Idea shall have utility to prospective customers
Sources of
Business Ideas
• Customers Survey among
existing and prospective
customers
• Existing Businesses- Study
their product features and
capacity utilization
• Distribution Channels -
Channel members can
suggest improvements or
entirely new products
 Government - Patents filed, Government
regulations, Industrial policy, incentives, etc. Govt
organizations bring out publications
FIs and Development Agencies - Provide ready
projects and details on that
Sources of Research & Development - Entrepreneur’s own
R&D, formal or garage type
Business Trade Fairs & Exhibitions - Showcase new
technologies, innovations, new m/c, processes
Ideas Focus Groups - A moderator leads a group of
people through an open, in-depth discussion to
elicit ideas
Collective Notebook Method - Members record
ideas three times a day End of the month, a list of
the best ideas is developed from suggestions
 Brainstorming - No criticism is allowed, no negative
comments, Freewheeling is encouraged, Quantity of
ideas is desired, and Combinations and improvements
of ideas are encouraged.

Substitute- What else instead? Another ingredient?

Other material? Another process? Other power?

Sources of Other places? Other approaches?

Business Ideas Rearrange- Interchange components? Other Pattern?

Other layouts? Other sequences? Transpose cause
and effect? Change schedule?

Combine- How about a bend, an alloy, an assortment,

an ensemble? Combine units? Combine purposes?
Combine /appeals? Combine ideas?
 1. Dream Approach
• Think big on the new idea
• Don’t impose any constraint
• Then bring it to a workable form

Sources of 2. Market Gap Analysis

Business Ideas 3. Life-Activities (work, hobbies, shopping,

sports, social events)
• Interests (food, fashion, family, recreation) and
• Opinions (about themselves, social issues, business,
products).
• style Analysis Method - It involves measuring
consumers’ major:
 A prefeasibility study (PFS) is an
early-stage analysis of a potential
mining project. These studies are
conducted by a small team and are
designed to give company
Prefeasibility
Study Provide information about project’s
logistics, capital requirements, key
challenges and other information
deemed important to the decision-
making process
 A PFS is a rough screening of
the business ideas generated in
the previous stage
• Aim is to identify the most promising
Importance of idea(s) and discard the unattractive
PFS for business options
• This reduces the number of options
ideas thus saving time and money
• Often, the pre-feasibility study returns
only one most promising option.
• PFS is conducted for the purpose of
determining whether the idea is worth
pursuing.
Business Process
PFS Analysis
Advantage of PFS
• Improves project team focus
• Provides valuable information for the “go/no go” decision
• Narrows the business alternatives
• At times, helps to discover new opportunities
• Identifies the valid reason(s) to undertake the project
• Outline various business scenarios and the strengths and weaknesses of each
• Determines whether a full-blown feasibility study is warranted
• Enhances the success rate through evaluating multiple parameters
• Aids decision-making on the project
• Identifies reasons to not proceed
PFS Focus
Technical Feasibility

Market Feasibility

Economic Feasibility

Financial Feasibility

Legal Feasibility

Operational Feasibility

Project durability
 Factors to be
Considered

1. Does it fulfill
a felt ‘Need’ or
a ‘Want’?

Selection 2. Does it give

an edge over
other products
Product Differentiation (better)
Speed (faster)

of Product in the market?

3. Product
Cost Leadership(cheaper)

Acceptance
(research and
testing)

4. Future of
the Product
(obsolescence)
 5. Demand-supply gap (price
sensitivity)
6. Project Feasibility
Factors to
be 7. Value Proposition
Considered
8. Government Policies and
Support
Selection Criteria
Technical Criteria
1. Determine facility needs: m/c, equipment, h/w, s/w, auxiliary equipment…
2. Suitability of production technology
3. Availability and suitability of:
• Project site
• Raw material
• Labour
4. Identify points of vulnerability
 Market demand and the price at which demanded

Industry structure

Industry Competition
Market
Criteria Market potential

Access to market outlets

Market share & Sales projection

 Human resource required and their skills

Organizational structure

Organizational Background of Promoters

Criteria
Competency of Management

Legal form of the organization

 Profit and loss
projection
A 12-month P&L projection
A 5-year P&L projection
Cash-flow
projection

Financial Projected
balance sheet

Criteria Breakeven
calculation

List of
assumptions
made in the
P&L
Break even analysis